guy: crying shame. after writing down the value of its two biggest divisions. the dividends and bonuses are threat, but the stock is bouncing. the asian slowdown hits hard. vw's -- he knew of emissions problems as early as the spring of 2014. ♪

guy: good morning. you are watching the pulse. we are right here in london. i'm guy johnson. europe's biggest investment bank, germany's biggest bank is racing for its biggest loss and a decade. deutsche bank could scrap its dividend. it's boosting reserves for legal costs. sounds like a bad thing. ryan chilcote here with the details. we got a lot of bad news. it sounds really terrible. but stock is up. what is going on? ryan: the immediate reaction was negative. the stock is up. there is a giant competition going on. the balls -- the balls on the up.k -- the stock now why? a lot of people saying we thought when they did this announcement we were going to get a capital increase. the fact that the dividend is

going to take a hit, is a do it -- is a positive. it increases the likelihood of a capital increase down the road. analysts whonty of think a capital increase could happen here it -- happen. ryan: the second issue is take everything that was happening in the statement to the side, look at pretax profit. it is either smack in line with slightly -- thing guy: performing ok. ceo gives his new strategic reveal, what we see here is direction. maybe some conviction. maybeularly indicating postbank, more conviction on the scale.

indicating -- indicated by the right down. more conviction on what they want to do with their chinese bank that they have a stake in. this is a big flat that that's a big flag that this may be up for sale. this is something the market has greeted. very negative. people starting to absorb this and the shares are up. this is a new boss. they tend to come in and look at the business and say i am not quite sure about the bayou of that. there is a -- about the price of that. shares were down 515%. since he took the helm and it's a bank. he compared that to the european banking index. is -- he has outperformed a

poorly performing banking sector. guy: ryan chilcote. german imports slumped the most since 2009 recession. foreign sales declined 5.2%. economists had expected a fall of 0.9%. largestsign that euros economy is vulnerable to risks. from- critically emanating weakness in china. week, let's find out what has been going on. -- we're coming back after a week. the rest of the world back in party mode. has there been a change in sentiment? >> good morning. i don't think any major changes.

a little bit of catch-up. with seen a rally in shanghai. the fundamental story has not changed. german exports, not the story coming out of china. it is a slowing economy. heading into a very big week for economic data out of china. we are going to get trade numbers, inflation numbers, gdp numbers. it will give us the good read on what the economy has been doing during the month of september. next five-year economic plan for china. the president will unveil it. days in terms of getting a gauge on where china's economy is at. guy: in terms of the currency story, we have seen the gains. indonesia where a

number of markets, there may be -- they may be more easy eric. you can relate it back to some of the big themes. enda: we saw big selloffs in asia and indonesia. indonesia has rebounded pretty sharply. we see fund managers saying they are buying indonesian currencies. as long as growth continues to slow. as long as commodity prices remain make, it is hard to call a big turning point for some of those emerging markets in asia. guy? guy: thank you very much indeed. enda curran, joining us out of hong kong.

abby lynch joins us. got data out of germany this morning that is bleak. much does this undermined the long europe case that so many people have got built into their portfolios. abby: it weakens it. if you don't go long europe, where do you go? the world as a whole is pretty challenging. u.s. data suggest the u.s. economy is slowing sharply. heading down towards a recession. europe, at least things are leaning forward very slowly. the lazy trade of long europe is being hit quite hard on folk -- quite hard by focusing on germany. much of the trade is a

further expectation of qe? abby: markets have seen what qe did. if we look at the unemployment europe,flation data in that will say that mr. draghi needs to do more. stock prices go up. i think we will see more qe from mr. draghi before next year. guy: any opportunity to go further in? selectica -- be selective. look at the fundamentals of the businesses you are buying it try to understand how resilient is this to an economic slowdown in america come out in asia. america, out in asia.

volkswagen is a goodbye even if we get qe. investors do the homework. not -- notng go simply go let's by an index. are a lot of european -- outperforming the index. bounced over the last few days. if they start chasing that benchmark, what is the possibility of a short squeeze around that sort of space? house set up are we for a squeeze? -- how set up are we for a squeeze? underweight energy and

material. think if we see that, it will be a short-term pay grade. the fundamentals are still pretty negative. we are seeing gdp growth slimming down globally. opec thato sign from they want to cut supply. u.s. supply may be rolling over. still quite slowly. weakrices likely to remain and that is bad news. majors a starting on a daily basis. guy: he will be back later. let's take a look at what is on our radar. top u.s. official will tell lawmakers that he was first made noncomplianceions

issue in the spring of 2014. he was alerted after the .ublication of a study brazil's audit court has voted to reject the president's 14 account. it says the government used maneuvers and noted to hide a budget deficit. to hide a budget deficit. -- it will come as the democratic presidential front-runner unveils what she terms risky wall street savior. the u.k. telecom watchdog has

turned down the merger. ceo says that deal could lead to high prices for customers. it would be unlikely to have any positive impact. in a submission -- profits made by pt's open reach. coming up on the pulse, what will the bank of england say about the global slowdown? after the break. ♪

guy: 50 minutes -- 15 minutes past the hour. we are on the radio, we are streaming on bloomberg.com. let's switch our attention to high-yield bond markets. goldman sachs is issuing investors at a conference in london. manus cranny is there. manus, over to you. manus: guy, thank you very much. is the european leverage conference. dennis, welcome to bloomberg. had agh-yield market has fairly tough quarter. pastsimply, has the worst

or we should just or should we expect another punch? to think about what we have seen over the last couple of years. yields that have been offered to investors have been very tight. a number of people were calling for some type of correction, asking questions about whether credit has become too tightly price. some of the correction that we have seen in the third quarter. as we look at some of the performances, energy down. this goes back to your view on global growth. to the issueck which is china. what is your perspective? you got nearly 500 issuers and clients. what are they saying in terms of

those industries? over the last number of years we have seen a number of issues that have faced equity investors. china slowdown, commodity rice trends. -- commodity price trends. they have wrestled their way through those issues and not been overly disturbed. with those type of sectors, that in therted to impact financial grade markets. we are seeing an impact translate into the leverage finance market. manus: the issue has gone on. worlds the interest rate 1.7 trillion was issued over the last five years. denis: they have been very

prudently managing their capital structures. they as low as they were, went out and refinance all their debt. extended their maturities. now the question for them as -- what are they going to use that money for? the mindset has shifted from being very defensive to a bit more aggressive, more m&a activity. they look to access the markets to do strategic activity. question, weher were chatting about this. i said this to peter oppenheimer. biggesten is one of the bond issuers here in europe. and theon or the event reverberations into your own perspective me your

on what that event has done to high-yield? denis: bury different as you think about it -- very different as you think about it. remindern serves as a that within investors portfolios, they are taking credit risks. a lot of them are two quick to ignore or brush over some of the risks. in the noninvestment grade states, investors would be saying if something like this can happen to volkswagen, maybe we should take a careful look at our portfolio and figure out if we have certain exposures that we have not been thinking about. up, part ofto wrap the discussion, where does high-yield fit into the store at? what can he do? what is your perspective? denis: where europe goes from , availability of capital is

critical to european companies. the noninvestment grade space -- what we have seen is much more institutional capital and capital market access. for is a good thing european corporate's. we are bullish. more europeans will be able to take advantage of it. coleman, guy back to you in the studio. cranny at the conference. the imf director has told bloomberg he thinks u.s. federal reserve should wait for the right moment before raising rates. >> i don't agree that the jesuit strategy for the fed. the fed needs to do what is right when it is right.

in terms of price inflation, you can see the conditions are there now for the fed to increase interest rates. our recommendation is for the fed to wait until there are tangible signs that inflation is really rising. guy: back in europe, we get notes from the policy meeting. the bank of england will give its decision on interest rates. jamie murray is our head chief economist. thee, the market is pricing first rate increase. well carney try to disabuse the market of that idea? jamie: the u.k. is running out of slack. wage pressure is building. inflation, we look at it on a monthly basis. we are seeing inflation at 1% in

january. there is some signs of inflation. guy: why is the market wrong? jamie: this is connected to what economist think. it is because economists are focused on slack. we have had a persistent number of socks. -- number of shocks. i think markets are focused on , --ent inflation guy: when you build it into your models when you see the first rate hike coming? jamie: early next year. the risk is the bank of england has very rarely led a global interest rate hike.

it tends to be the fed the started. given that next year is election-year in the states, unless the fed goes in december, that could mean the fed is then stymied until 2017. the bank would then have to say we need to do something and go first. that is something that is going to be weighing in their minds. if cc months is the wrong number, what is the right number? jamie: it could be february. murray, thank you. -- let's move on to another big story. the head of volkswagen in the united states will turn to it a congressional meeting in the

united states today. affect --ion may let's go to berlin. hans nichols is in there. what did they know? hans: here is what volkswagen has said. michael horn said he was made aware in the spring of 2014 of possible noncompliance on emissions. in 2014, i was informed that the technical teams had a specific plan for remedy to bring the vehicles into compliance and they were engaged with the agencies about the process. volkswagen spokesperson said they did not know that he did not know the company had software a device, that is at the center of this scandal. we have testimony from the environment to protection agency officials. they will be telling the

committee that the fines that they assess will be determined on what they think the economic benefits that volkswagen derived from it. here is what they're going to say. to assess -- pursue appropriate measures. hearta will look at the that the pollution caused. how much harm there was. volkswagen will not be asking for certification of their diesel vehicles in the states. that is another development. yesterday, they submitted their plan for a fix to german authorities. is if ifirst reaction have a diesel vw, i'm going to be thinking about the value is less. is that the case? hans: it depends on who you are buying it from. it takes a look at what dealers are selling volkswagen four.

they are being sold at a discount. they are down 10%. websites,to trader people there show barely any moves. hasn't taken a huge hit. you and i have a different approach. you'll be worried about the value of your vehicle. -- i don'texcited know what the right word is. isnow i have something that not exact the street legal and i feel a little dangerous. guy: we need to have a big conversation after this program program.cles, -- hans nichols our international correspondent. up next, the governor of south african banks, we'll hear from him next. we are going to talk about deutsche next.

the stock prices trading high. let me know. you will find me on twitter. maybe these numbers are not quite as bad as they look. ♪

welcome back. you're watching "the pulse." these are the bloomberg top headlines. deutsche bank is bracing for its worst result in at least a decade. the bank faces a 6.2 billion euro loss in the first quarter after writing down the value of its biggest divisions. the company is also boosting litigation reserves and may cancel this year's dividend. that sounds like bad news. the stock is trading higher. the breakup. to have done the chinese markets a world of good.

marketing shanghai and shenzhen have surged after the golden week holiday. additional government efforts to boost the markets are helping too. policymakers are increasing targeted stimulus. predicted both the start and that the of china's equity boom says that investors should use the rally to sell. he reckons the shanghai composite must fall another 18% before it's cheap enough to buy. volkswagen's top u.s. official will tell lawmakers later that he was first made aware of a possible emissions noncompliance issue with the company's diesel engines in spring 2014. michael on will say that he was alerted to the publication of a study which found diesel models passatvw jetta and emitted more pollution under driving missions than allowed

under emissions standards. enc surged 8% in extended trading overnight as it is said to be in talks with pc maker dell over a possible combination of the companies. emc has a market valuation of almost $50 million. dell was taken private back in 2013. what the markets are doing, what's going on? mark barton, over to you. mark: the rally has peter. that rally in the msci saw a gain of 8%, the biggest rally for four years, that six-day rally. emerging market asian stocks fluctuated between gains and losses. stocksn fluctuating as well. look at the shanghai composite. it rose by 3% today. there's some disappointment that china didn't rise more. , the china hong kong

enterprises index, actually surged 11% in its biggest sinceay advanced april. these two indices, the shanghai ,omposite and the hang seng they were the worst performers in the world in the third and 28% sinking 29% respectively after china devalued its currency. have a look at one of the commodities i'm focusing on. silver, the precious metal, the five-day rally has come to an end. this is a one-month chart. i brought up silver because we've got the minutes from the september federal reserve policy meeting released later. any indication as to when the fed will hike rates will certainly impact the path of silver. silver of course doesn't pay interest and doesn't pay dividends. if the fed indicates it's going

to hike rates soon, that could dent the pathway of silver's advance. silver has rebounded 11% since hitting a six-year low in august. interestingly, the precious metal, i looked earlier, which is little changed in 2015, it's the second-best performer in the bloomberg commodity index after cover. that you didn't know that. let's finish with deutsche bank. getting close. have a look at the deutsche bank intraday chart. yes, we know it's the biggest loss in over a decade. the company may cut its dividend. what's interesting is the shares were down 3%, they rose as much as 3%. we are looking ahead to the strategy 2020 update on october 29. there was no capital increase today. some say if he was going to

introduce a capital increase, he would have done it today. others are saying the biggest loss in 10 years could be a sign of management willingness to dispense with cost bank and the more decisive on strategy in the future. haveche bank shares rebounded. there you go. guy: mark, thank you very much indeed. getting close to the world's finance chief and central bankers gathered for an imf summit. top of the agenda is the timing of a rate hike from the u.s. federal reserve. this amid a sluggish global economy. francine lacqua caught up with the governor of the south african reserve bank and unsurprisingly, you could say, the fed was at the forefront of his concerns. >> the job is tough. .ou get complicated i think that we all would like to know what the fed is going to do.

the question is, when will that hike take place? when that hike takes place, how does it affect emerging market economies, and a country like south africa? we think this impact would take place. first, the resizing of south african assets. this is taken mainly through the exchange rates market. what we have seen is that capital had been flowing not just out of emerging markets, also flowing out of emerging market funds. the fund managers have experienced an outflow. the second is growth. to the extent that the fed hikes rates because the u.s. economy is strong, that is good for the global economy. of course, if they

delay, it makes your job a little easier. do you think it's easier for the fed to delay? >> uncertainty is not good for anyone. if it doesn't follow that the fed moves, that the uncertainty is gone. there will always be another fomc meeting and everyone will still keep asking, will they continue on it or be on hold? one thing that is clear is that we will continue to have this uncertainty in global markets. francine: you revised your forecast down for growth. out of that impact your interest rate hiking cycle. >> we don't target interest rates. we target inflation. what we have to look at is the inflation funds. our focus on inflation shows that next year, we will be out of targeting the fourth quarter. in both quarters, we are not concerned.

the reason we are out of target the thirduarters -- inflation this year was low. the fourth quarter inflation will be low. that keeps us out of the target. the aspects that we have identified that are a threat to the inflation outlook, one being the exchange rate, which is dependent on what is coming out of the fed. the exchange rate is also impacted by the commodity supply cycle. south africa is a commodity-producing country. you have seen that there has been this global realignment of exchange rates, but in particular, exchange rates of commodities. francine: where do you see the rand going? >> difficult to call where the rand would be going. isdo know the rand level determined by the forces of demand and supply in the foreign exchange markets. is us, what is of concern

whether the depreciation of the rand slips into domestic inflation or whether it becomes a shock. if we think that it will treat itself into second round effect, then we would be left with no choice but to deal with the consequences. francine: you are in a very difficult situation. when will you be able to determine whether the rand is weakening? >> we do not target the exchange rate. there is another aspect that you've got to bring into the picture. this time around, the rand weakness coincided with the low oil price. leaves ail price mitigating sector in south africa. dilemma that policymakers in emerging markets will be facing

is that you have got slowing growth and you still have inflation pressures. if you are a commodity importer, you have a boon because commodity prices are low. if you are a commodity exporter, this will be combined with the weakening of your exchange rate. that was the south african reserve bank governor speaking to francine lacqua. coming up next, making a call on the next investment opportunity. we are going to speak to a man who was behind the world's first jewel screen smartphone and find out why he's excited about electric vehicles. what else is he excited about? ♪

the hour.nutes past welcome back. you are watching "the pulse." the inventor of the world supposed jewel screen smartphone managed to turn his company into a $1.2 billion business before they were bought by a russian telecoms dinette. he has launched an investment company. it helps entrepreneurs bring their ideas to life. he joins us now. the latest venture that you got involved with, the timing couldn't be better. you're getting into electric vehicles at the time vw is

getting hammered by its diesel problems. timing is everything. >> the main idea of this wondered why-- i not all cars are electrical now. the main answer is because today, it is much more expensive than a conventional one. mostly because of the cost of batteries and the cost of the integration because of the new companies. the objective for our team was to create the vehicle which would be the same price as a normal one, but will consume much less fuel than a normal one. car is 100% electrical, but we have a generator onboard which creates energy. guy: that is connected to the battery, so that is a range extender. >> so it is buses and trucks.

all range. approach, we have everything which is good from electrical, but we don't have the limitation of range. the vehicle can work all the time. in: we don't have to invest -- when i try to look for an electric charging point around here, there's like three within a mile. if i'm the fourth guy that gets there, i'm in trouble. you kind of solved that problem. >> it is electrical because of the self generator onboard. with this approach, we think we toress the issue with -- make it happen, that electrical vehicles -- penetration will grow much faster. guy: elon is wrong, is he? >> probably for passengers cars,

fine. but for commercial vehicles, i don't think that fully electrical is the right answer. bmw if i go out and buy a electric the own goal, they have the option of a range extender. people are doing this in passenger vehicles. as you highlighted, we don't have to invest tons of money in infrastructure. we invested so much in clean diesel. we don't want to make mistakes. thehe idea that you limit mistakes because the cash down is smaller? >> exactly. what is really happening, we already see that in city cycle, we can reduce fuel consumption by a factor of three. it is three times less fuel consumption. our truck has a one liter engine. managed news is that we to create this car, so it is fully working, and we created

the company which would work from 2.5 tons to 26. it can have 1, 2, 3, 4, or six motors. so it allows us to make the cost low because we don't make special -- guy: just put them in series and off you go. how long before we start to see sufficient scale being generated in this part of the automotive industry to allow cost to come down? are you already making cost come down? when does the scale come to make the scale work? >> today, we have all the technical work done. now we are in talks with some oem's which will produce the trucks. guy: which ones? >> i will not announce today. normally, the cycle to create

the car which will go on the road takes two years. guy: does the diesel scandal make regulators more -- does it happen more quickly because of what is happening with volkswagen? do you think consumer acceptance is going to the accelerating the half-life of this story? want togovernments reduce the fuel consumption. unfortunately, there are not so many products on the market. so they cannot be tough on that point. on the other hand, if you take fleet managers, what is important for them? cost is one of the main drivers. they are not ready to pay for the truck which would make the return investment on seven years. they want to make it with the same price which it is today, but consumes much less fuel. fuel is one of the highest costs

for the fleet managers. so our technology direct exactly this. guy: out of curiosity, what else is buzzing around your head right now? where do you see other opportunities? >> i really believe in internet of things. guy: ok. you've invested in that? >> yes. deviceson connected should happen within the next 10 years. these networks will never hold it. i'm from telecoms. there are new technologies which can enable this. we will announce it a little bit later. guy: the other one? >> personal health care. all,ieve that we should like as a person, we should own a house by ourselves. not our doctors. creating, we are

something which could make the analysis at home, which would help people to make analysis at home, and for people who focus on their health to prevent any diseases. i'm very much interested. guy: dennis, i could talk to you all day. you've got to come back and do this again. the founder and ceo of kinetik, in some interesting spaces right now. up next, investment in the u.k. reaches record levels. we will look at the explosion in growth after the break. ♪

guy: want back. i've got some breaking news for you. it relates back to vw. the german car authority has received a letter from vw about the affected cars. it's going to review the measures looking to fix the emissions scandal currently engulfing the company. the authority has said it will publish the results of that review when it's available. is on theoss of vw hill today, giving testimony in the states. stock this morning is up 4.6%. the vw proposed engine hardware

fixes for 3.6 million eu diesel cars. beforet have the fix september 2016. a bit more significant maybe than we thought. made the proposal to the german authorities. it is going to take a wild to get it done. the engine fix for 3.6 million befores won't be there september 2016. we will continue to monitor this story. doesn't seem to be having a meaningful impact on the stock price. as the bank of england debates the strength of the u.k. economy, one area showing off its expansion is the tech sector. the industry has attracted a record level of investment. here with more is caroline hyde. we've known this is a trend for a while, but really impressive numbers. caroline: gathering pace. we've surpassed 2014 in terms of capital money flowing into the u.k. for tech.

perhaps less music for george osborne's ears is that it has dominated in london. 75% is traded here. three quarters coming into london, coming into the main capital. they want the wealth to the spread across the northern powerhouse. this blows me away. investment levels in london have timesed by 10. that is what tech city has managed to do for london. companies by0 tech 2020. talking about startups, the scale of conundrum. you and i were talking about it . guy: that i think is the most pivotal number. the early-stage stuff, we kind of known it. the big stuff is scale up. caroline: that's what you want to see more. they want to see it going into

the bigger companies. there was more money from oxford ventures from, from google ventures. it needs to keep on growing. interestingly, secret escapes is part of what they deem the e-commerce area. that is really hot right now in terms of sectors. these stats are coming from london and partners, a group that backed london as a can of for investment. there's a big event going on, and it is a big at the secret for the industry -- a big advocacy group for the industry. they are saying retail is a hotspot as well. half a billion this year. guy: nice work. nice numbers. caroline hyde on tech in london. we will build a house and see what happens. volkswagen still up on the back of the news we've had out in the last few minutes. that wraps up this hour of "the

pulse." for our viewers, it is a second hour of "the pulse." plenty coming up. we're going to take a closer look at those deutsche bank numbers after that q3 profit warning. see you in a moment. ♪

guy: germany's biggest bank delivers a profit warning after writing down the value of its two biggest divisions. dividend and bonuses are under threat. no shame in waiting is the message from the imf in lima. we will bring you the interviews, including christine lagarde. carney in the hot seat. the ble delivers its latest policy decision. welcome to "the pulse," live from london. i'm jonathan ferro, alongside

caroline hyde. in new york is tom keene. what are you excited about today? tom: we continue with wonderful guests on "surveillance." jon, we will do a lot of international relations, that is front and center in on the cover of every people, the escalation of russian activity in syria. of course front and center is the economics you love -- ben bernanke will be on bloomberg television later this morning. he will join us on "surveillance" in two or three hours. i attended his book party last night. great attendance i financial and economic leaders. jonathan: tom keene always giving the best advice. international politics and focus. here in europe, soft focus on germany. weakness for a fourth day in a row.

deutsche bank is bracing for its biggest quarterly lost in a decade. in the headwinds for vw continue. let's bring in the german team from berlin. hans nichols joins us, and in frankfurt, nick comfort. but the numbers in perspective -- we go back and forth on factory orders, on industrial production, on the exports. what is the headline out of these numbers? hans: the headline out of the exports is the worst of the number is being the revised pmi figures that we've had. exports dropped 5.2%, sales 5.24%. within that number there is another one that is also depressing, the import declining 3.1%. if you think of the german economy, especially for the note their lives and france, they import a lot of material. to export more means we will have even further depressing,

further negative numbers around the corner. remember, with all this, this is an factoring in volkswagen. the story of the summa has been -- of the summer has been german data. we saw virtually no greece affected germany and now we are starting to see negative numbers and many the effects of the china slowdown, but we still haven't even priced in cost up the folks lik volkswagen number. jonathan: nick, you look at the stuff coming out from the corporate and it is not pretty. at the deutsche bank story, a stock that is now trading higher -- i can reconcile. what is the story? what we are getting from analysts so far is that people are happy they are tackling the issue. of course it is not pretty -- jonathan: we will have to leave it there because your microphone is in picking up the sound.

hans, we were talking about the problems in germany. is german inc in crisis? and we take it that fall? hans: this is normally where we had the next essential crisis -- look, the auto sector is going to go through transitions. we still don't know whether there will be a spillover effect from volkswagen or whether it will affect the entire diesel industry. hasstory of deutsche bank been hit and hit in hamburg the last 12 months, 60 months. now we have folks lik volkswagen joining that. this doesn't seem to be across all sectors yet, but the numbers when we are looking at the economic data says there will be a slow down and it will probably -- we think china is the main problem. jonathan: hans nichols, nicholas comfort.

sorry but the technical into ssues. auto. now joined -- it was the kitchen sink, better bigger than some people expected. why are people relieved this morning? >> i think there was a little bit of a debate this morning. it seems to me that from the equity markets point of view, branches -- main one is the dividend cut and the other is an increase of capital increase. this is all about deutsche bank being light on the capital side, and one of the questions is do they have to have another meaningful capital increase, diluting for shareholders? the idea that maybe there won't be any perfect capital increase having a part

in this. back to the go financial crisis, the u.s. banks clean up the balance sheet. here in europe, we are still dealing with legacy issues. is -- howbout this much of this is about the business and how much of it is clearing up the mess? otto: it's not really related to legacy from the crisis, directly. and that is a fair point. in deutsche bank's case, it is lagging. deutsche bank compared to some other u.s. and european players, i would argue, has been slow in adjusting to the change, essentially regulatory, environment, which means that some of their businesses are no longer very capital effective. others turned out not to be

working as well as they thought, such as when they bought -- they particularly to increase the share of retail deposit in the funding of the group. turns out they can use the retail deposits for investment banking, so it is a lower roe business and i think they want to sell it into the market. jonathan: when i look at europe, for banks, the advisory business should be doing well. m&a should be picking up for them right now. we have seen the numbers. why isn't deutsche bank on the front foot? the equitynk business is doing well, as you say, even including deutsche bank. one issue that they have, i would argue, is that deutsche

has in terms of business been more of a fixed income house than others. i think their strategy initially was while everyone was pulling back in fixed incomes and secondary trade, such as credit, ,heir strategy was to stay big and basically increase the return off the dissidents by being the largest player. that itthey have found doesn't quite work out as well as they were hoping, and the market is no longer giving them time, so they have to shift now. i think cuts to the fixed income business are very likely in the coming restructuring. jonathan: final question, ott. -- otto. it will be the biggest quarterly loss in at least a decade.

once we have still with that, what do we have to deal with in the following quarters? area well, one uncertain remains with litigation. ongoingtill have litigation in the u.s. over rnbf transactions from the financial crisis times. you also have investigations in relation to potential money laundering, etc., and violations of u.s. sanctions. those are of course uncertain and could be costly at some point. but i do think -- at the end of the day, what is really the iscial bit for deutsche bank how they plan to restructure the investment bank, how the market will assess that and how successful they are in implementing their plans. jonathan: otto dichtl, thank you very much.

deutsche bank is on top of the corporate radar and caroline hyde is here for a look at what else is. caroline: volkswagen's top u.s. official will tell lawmakers later that he was first made aware of the emissions problem in spring, 2014. alertedsay that he was after the publication of a west virginia university study, which found diesel models of the vw jetta and passat admitted far more pollution under driving conditions than allowed under federal emissions standards. hillary clinton will propose a tax aimed at penalizing high-frequency trading strategies later today. the democratic presidential front-runner is set to unveil proposals aimed on what she has termed risky wall street behavior. the u.k. telecom watchdog has carved out on the merger of o2 and 3, winning regulatory approval. the ceo says that the deal could lead to higher prices for

unlikely tout is have any positive impact on investment in the communications network. vodafone has become the latest voice to call it for the breakup of ct. profitsd concerns about made by their open reach division which controls the national network. jonathan: caroline hyde, thank you. still to come, central banks and focus. a rate decision in minutes on the bank of england. then the european central bank releases its account of the september meeting. last but not least, minutes from the u.s. federal reserve. we will discuss after this short break. ♪

>> identity green with the jesuit -- the fed needs to do what is right when it is right. if you look at the united states, it turns away from price inflation. the conditions are there now for the fed to increase interest rates. our recommendation is for the fed to wait until there are multiple sides. that inflation is really rising. jonathan: that was the imf director of monetary and capital markets speaking to bloomberg's francine lacqua. we will hear more from him later

in the show, and we will have more interviews from lima. francine will be speaking to christine lagarde. half an hour later, dr. jimmy in yong kim. it is not all about janet yellen, it is also about mark carney and mario draghi. first of all, let's bring in the founding member of the monetary policy committee of the bank of england. he is still with us. great to have you. first question. you are sitting on the mpc today. does it really were you what you see happening abroad? does it factor into your decision? >> no, i don't think so. i think there are wobbles, certainly, in the markets are certainly nervous, but it seems to me that the fundamental view you will have to take is -- is

this country in need of an interest rate increase or not? the debate, i suspect, will be pretty hot. i think we might well see one or two more members voting or a rise this month. i don't think we will see a change but i think the vote could well be a change. good morning.us, i know you studied at iowa state university, and i wonder if you could agree that not only janet yellen but mark carney's central banker to the world. they seem to be the only two economies working. i think certainly the u.s. and the u.k. are in better shape than many world economies at the moment. hashead of the u.s. fed always been the central banker to the world, if indeed there is such a person. i think it is not an easy spot to sit in, but in the way the u.s. works, janet yellen is

probably trying to persuade her colleagues to take the temperature. is going tolagarde be speaking with francine lacqua in lima later this morning. when i look at global growth and the new mediocre, the dirt of productivity in america, where does growth come from? how do we get to an economic growth that will satisfy christine lagarde? deanne: i think what we are seeing is a growth divergence, not a generalized lack of growth. certainly in china, it is still growing and very well. the u.s. is going pretty well. the u.s. economy is pretty close to full employment however you define it. i think there are worries, certainly, in some emerging markets, but it doesn't seem to me that it is sensible for the world economy to be aiming at

something that is unachievable in the long run. i think something like 4.5% is unachievable. jonathan: inflation is trending lower. central banks are stepping up to the plate, saying they will do more. u.k., rates market in the they anticipate the first hike on the back end of next year. i wonder how wrongfooted everyone is going to be going in a 2016 when the energy effect starts to drop out of the a dovish and how long pricing could be -- what are your thoughts? deanne: i think it will be a surprise. it shouldn't be a surprise when it begins to drop out, because it is absolutely mathematically achievable and inevitable. but i think at that stage it will be easier for those members of the monetary policy committee, the fed, to explain an interest rate increase. i suspect there is some waiting, that it might be the right moment.

jonathan: you are sitting on threadneedle street right now and the decision comes out later. you look at market pricing. do you anticipate that it is your job to get financial conditions to tighten, to anticipate what you see is what will happen? jonathan: i think -- deanne: i think there is not as much of focus on market conditions as the market inks there is. where they is about economy is likely to go in the next two years. inflation, but also employment. certainly on the employment front, this economy is pretty much -- tom: i will agree. it is nice for one of our guests to speak about the real economy. we have a real economy with negative interest rates that jon ferro tells me about everyday. i don't understand the interest rate structure that we are in if we have a complacency about the real economy. how do they duck tail? deanne: i don't think they duck tail very well. the decision you have to take is

which side of that equation are you looking at. if there isn't a congruence, in economic theory, between zero or negative real interest rates, and an economy which is pretty close to full capacity, then you have got to decide where are the bigger risks. it seems to me that there are some risks in the natural market that are just aggravated by very low interest rates. tom: you absolutely nailed that. you have got to decide -- what does mark carney and his team deciding in the coming days? deanne: i think they are deciding whether to move now or later. i don't inc. there is a decision about not moving at all. where is the balance of risk? is there sufficient evidence that they could be explained to move interest rates, to begin to move them now? everyone agrees to move slowly, once they start to move, but

where is the burden of proof? is it that you think interest rates are clearly too low, and the burden of proof is on those who want to leave them low? or is the burden of proof on those who want to move? next, back to work. how the chinese markets fare after the golden week holiday, and if it gets the seat on the fomc. we will debate that after this short break. ♪

jonathan: some of you will be pleased to know that the markets in china have reopened to the upside after a weeklong holiday. the shanghai index closed up nearly 3%. let's go to our chief asia economics correspondent in hong kong. enda, what is behind the china gains? are we playing catch-up or has there been a change in sentiment? enda: good morning. i just think it is a bit of a post holiday glow will stop i don't think the story on china has changed very much. it remains the same, but we are going into very important week, which will give us a string of top-tier activity data. we are going to get trade numbers, inflation numbers, gdp, which hotel is how the economy travels through september, and whether it is getting traction. beyond that, we will get the new

five-year economic plan from the communist party. where they want the economy to go. we are heading into a busy few weeks on the china economy front. over the lastkly, week with what we saw on the back of an ugly payrolls report, an unwinding e.m. the msx recovering, emerging stocks recovering. is that a short-term swing or is it something more fundamental? enda: i think you have just summed it up well. it is kind of a relief effect in asia. you have a big rally in indonesia. the story hasn't gone away. the fed remains the elephant in the corner. a risk of capital outflows, commodity prices are weak. i don't think anything fundamental has changed and the question will hand over the emerging markets at least in asia. jonathan: thank you very much. deanne is still with us.

we know it is factoring into tee fed's decision -- of the bank of england the inking about what is happening to china? deanne: i don't they get impacts the british economy in the same way as the german economy. we are not so much export driven. but of course there are indirect effects. and we have aes, lot of big commodity produces in our stock exchange. through the financial markets there is an effect, but i don't the get is a big one. jonathan: 30 seconds. if you had a vote today, would you vote for a hike to join mr. mccafferty? deanne: i would. jonathan: thank you very much. ♪ the only way to get better is to challenge yourself,

and that's what we're doing at xfinity. we are challenging ourselves to improve every aspect of your experience. and this includes our commitment to being on time. every time. that's why if we're ever late for an appointment, we'll credit your account $20. it's our promise to you. we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around. i just had a horrible nightmare. my company's entire network went down, and i was home in bed, unaware. but that would never happen. comcast business monitors my company's network 24 hours a day and calls and e-mails me if something, like this scary storm, takes it offline. so i can rest easy.

what. you don't have a desk bed? don't be left in the dark. get proactive alerts 24/7. comcast business. built for business. jonathan: good morning and welcome back to "the pulse," live from london. i am alongside caroline hyde and tom keene. 30 minutes past the hour. let's get you up to speed. inbev says it is surprise that the board of sab miller says it is taking the proposal is undervaluing the company. willing towill be pay about $104 billion for the world's second-biggest brewer. german exports unexpectedly

slumped the most since the 2009 recession. foreign sales declined 5.2% from the previous month. economists had expected a fall of just .9%. deutsche bank is bracing for its worst quarter in at least a decade. the biggest investment bank in europe expects a 6.2 billion euro loss in the third quarter, after writing down the value of its two biggest divisions. the company is boosting litigation reserves since they it may cut or scrap this year's dividend. volkswagen's top u.s. official will tell lawmakers later that he was first made aware of a possible admissions problem in spring, 2014. he will say that he was alerted after the publication of a west virginia university study, which found diesel models of vw admitting far more pollution under driving conditions than allowed under federal emissions standards. back to you. jonathan: thank you.

let's check in on the markets. 30 minutes in the session with mark barton. mark: china reopens after one week holiday, and the global stock market rally comes to a halt. the all country world index rose , the biggest increase in that period in over four years. asian stocks fluctuating, emerging stocks fluctuating after the imf warns that developing regions face substantial challenges after rising for four consecutive days. little change in european stock markets, which is also swung between gain and loss. we have a central-bank triple whammy today. the bank of england releases a blanket monetary policy decision amid a, a lot -- at midday. ecb,t the minutes from the then later on we get the fed minutes from the september meeting, when the fed took many

by surprise by keeping policy unchanged. data today in germany will be watched very closely by the ecb exports, slumping the most since 2009, further evidence that the nation is feeling the pain of weakening global data. factory data and industrial production data in recent days, that data alone is getting hit by the german bond market, which is down by two basis points at .57%. what does it mean when it comes to ecb policy? we will know at 12:30 when we get minutes from the september meeting. will we get clues as to the ecb's intentions when it comes to tweaking policy? barclays expects further easing to be announced as soon as october via a time extension to the qe program. i want to have a look at one of the commodities i think keeping

an eye on. silver is down by 2.4% today. it has been rising for five consecutive days. investors are taking a breath before the fed minutes are released later. any information from the fed in those minutes that rates will be raised sooner rather than later isn't good for silver. it doesn't play a dividend, it doesn't pay interest, unlike stocks and bonds. silver has rebounded 11% after hitting a six-year low. hed verybe watc closely. have a look at deutsche bank. what a day for deutsche bank, after announcing the biggest loss in almost a decade. shares fell 3.6%, then rose 3.1%. they can also scrapped their dividend. what i didn't do was announce a capital increase. they said if they wanted to do it they would have done it today.

today's loss could be a sign of management being more decisive on strategy in the future. over to you, october 29. that is when you address this all on your future. jonathan: thank you very much. let's get more on vw on the other side of the atlantic. a top u.s. official will tell lawmakers that he was first made aware of a possible admissions problem in spring, 2014. hans nichols has more. it's the same question, isn't it? what do you know, how long did you know. that heey are claiming was made aware that there is a compliance issue, but he did know the specifics. we will get a lot more that out of washington as the day progresses. in the last couple hours we have two bits of news. one, volkswagen is saying that they won't have a hardware solution until september, 2016. that is what they told the

german authority. they think they may have a software solution -- the software fix "is only for the two-liter engine." they may need to do an entire hardware effects, which means the problem will be much bigger than expected. on the positive side, we just got audi's numbers for the month, and oddly, audi's sales are up around 6.7% globally. even in the states, the numbers were up 16.2%. this scandal hit september 18. one theory on this could be that all those sales were in the first half of the month, not the back half. remember, some of the audi diesels were affected. tom: we have the different ballet, including testimony in the united states. what is the momentum now? does vw have control of events? i am thinking of management 101

-- are they in control of the day-to-day events, or is there a spiraling here? management 101 is you are only in control when you know where the bottom is. when you know it, you tell everyone. i don't think volkswagen knows it yet, because a couple days ago they were talking about having a recall done by the end of 2016. morning, they won't have new hardware until september. that is making it awfully difficult to fix all those 1.6 and 1.8 liter engines. it seems like the technical side, the engineering side, is almost as complicated as the legal side. jonathan: hans nichols, we have to leave it there. thank you. coming up, investors have pumped a record one billion pounds into london's tech sector this year, but will the u.k. ever compete with california?

burbridge after this short break. ♪

jonathan: welcome back to "the polls," live from london. i want to head over to tom keene for a chat about the markets. we always talk about the u.s. treasury curve -- you have to know, and it doesn't signal much

optimism. tom: it is absolutely stunning. hsbc says that circumstances have changed -- this is a world he reported on, since january and the swiss franc. hsbc brings their yield called down to stunning levels -- you have time to read the note. but i think steve majors has a major bank shock on sub 2% yield. it is just stunning how we are beginning to refrain are yield structure and central bankers like mark carney try to catch up with -- this is a market vigilante out in full horse. jonathan: for the viewers that are familiar with stephen major, the big pain trade last year was a whole load of fixed-income analysts predicting high yields. he was out almost on his own in london saying forget it, they aren't going higher.

this is a man that called the market and that is why it matters. tom: i was at the ben bernanke book party yesterday. jpmorganor rowley of -- he is the one that really began that new terminal debate, and now we have someone like steve major resetting interest rates to a place where 142% of our viewers and listeners can't fathom -- i will call it a middle 1930's reset. jonathan: it is fascinating and i know we will talk about it more as we look at the market. the bottom line is that the rate pass will be immensely shallow and treasury yields are going to pop in the way they did in 1994. in the here and now i want to talk venture capital investment. it has hit a record high in the tech industry -- most of it is in london.

were going to bring in a lady that knows a lot about tech. eileen burbridge. great to have you with us. tom keene is in new york as well. how the question -- ideas got better or has the supply just caught up with the ideas? eileen: all of the above. they don't get decoupled. the capital always follows a good idea and great execution. as a consequence of london in the u.k. having more talent, greater depth of skills, great ideas, strong research, the investors are coming in and saying they want to put their money in. at silicon look valley in london and people ask where are the unicorns. i see them in california but not the u.k. why are they in europe? eileen: i hate that term. [laughter] eileen: they are in london

though. london leads all of europe and the number of billion-dollar valuation companies. they are here. they are coming fast and furiously. whereare a few sectors london has the ability to lead the world. syntec,cial services, that is where london has a big chance to shine. about theve to talk positive, but things sometimes don't work out. is your world clearing markets better than they did 2, 3 years ago? is that happening? eileen: yeah, i think it is. america, culturally, has been stronger than we have been, but i think we are getting better. a lot of people use terms like failing fast.

i'm not quite sure that's the way i would look at it. i think the point is to keep trying to go for the successes and not let things get you down. tom: jon and i talk about this all the time. we are always failing fast -- we are good at that. [laughter] tom: give us an update on the cloud. your world is so far away from ibm or cisco. is anybody going to make money with the cloud? eileen: absolutely. lots of people are given make a whole lot more money. lots of people will have to open new data centers. think about how much amazon makes, although that may be your point. people forget that they sell books as well. there is an opportunity for small companies to do the same. you'll have all sorts of verification, validation, payment services, ancillary services run on the cloud. jonathan: i met going to mention unicorns. [laughter] jonathan: i won't do it again. this is what i will say.

big companies in the u.s., big tech ideas that went public -- what is the exit strategy? it is not happening. -- why are these the household means going public? eileen: there are so much money. even in growth stages they can still make a generous return on investments so they are coming to these founders and saying let me give you more liquidity, give you the investment capital you need. uber's $41 billion and there is very little reason or it to list in the public market. jonathan: here's a question you will hate. 1990's, the bubble was in the public markets. now they are saying it is private. when you look at the uber valuation, for example. what are the thoughts on that argument? the thoughts i have about bubbles in general is that they are great until they pop. what i am am worried about knows

how close we are to a pop. we are nowhere near it. we have big companies generating massive amounts of revenue and i think we are safe for now. tom: eileen, how do you respond to critics -- i don't mean that those who way -- that observed your world of technology is employing a very small and always elite part of society -- will it be the propellant to a better, greater society? how do you respond? eileen: within your question there were two pieces. it is not just that. here in london, the technology sector is the fastest-growing for employment, outpacing the national average. we are growing faster in employing more people proportionally than any other, which is bringing more jobs to more people. the second half of what you said, that they are growing --

all these companies are growing. in a few years, if i so have the pleasure of sitting with you guys, we will be talking about digital and tech as a separate sector. has to be digital or tech enabled. becomes the world of employment. tom: with your visibility and celebrity, i will ask you a question. jon may not understand but i know eileen will get it. how did you do math at home when you were a kid? was it forced on you? were you being to death as a child? how do that work? eileen: i wasn't beaten to death -- we talked about this an early days of programming. i was sat down at the table. i was raised by a pseudo-tiger mom. i was told you have to be good at math. there was no option. [laughter] tom: jon had the same childhood i know. jonathan: i did. an italian father who was just

as harsh. i don't know where this conversation is going. [laughter] is one to watch -- we are focusing on the fed and the potential question of when will it raise the interest rate. we will hear from ben bernanke later on. stay with us. ♪

jonathan: welcome back to "the pulse." the imf is in focus this week. they are meeting in peru tomorrow. weakness in the world economy, the recent stock rout in china, and the fed are expected to dominate discussions. vinov says he remains optimistic about china. is --on't inc. that china i don't think that china is in a financial crisis. that is certainly not part of our scenario. but china has borrowed a lot. gdp and then5% of it needs to engage in the process of orderly leveraging. do this at a time where growth wherewing naturally, and there are more and more firms which are in a weaker position

because it is coming down, and debt service and capacity is lower. which willeraging, entail some default in the corporate, the expert of some nonvital firms, they need to be prepared to have significant results. francine: your concern is that the pboc officials don't manage this risk correctly? would that be the number one scenario? >> we inc. that the authorities are aware of what is at stake. therefore they are already on top of the banks, making them provision more, so they can get ready for what is coming. that is something i would like to dramatize, but it is true that banks need to center. francine: how concerned are you that the fed hike is too soon? we keep on saying that they missed a window -- did they miss a window?

>> no. i don't think they missed a window because the window wasn't there. i don't agree with the strategy for the fed. the fed needs to do what is right when it is right. broadly speaking if you look at the united states, in terms of wage and price inflation, you don't see that the conditions are there now for the fed to increase interest rates. in fact, our recommendation is for the fed to wait until there are tangible signs that inflation is really rising towards objective. francine: which could be in a year. >> i don't know. nab sooner because all of this is data dependent. i would not put a month to that, but with the fed, september i thought was wrong. jonathan: that was the imf monetary director, jose vinals, in lima. we will have more interviews to come. christine lagarde and jim yong kim.

they will both be speaking to bloomberg. ne.joins us from new york top of the agenda ? tom: international relations -- in this hour, it is what is all of a sudden transfixing america, can certainly washington -- syria and the russian attacks. we will bring back nato.h he will join us as we look at the unique international relations. you really ought to be taken aback by the impact this may have, like it did in ukraine. the linkages here between ukraine in syria. jonathan: you look at the fragility internationally and in the economy, it is one of the reason we go back to steve major. slashing his forecast of the u.s. 10 year treasury deal to wendyd of 2016 to 1.5%,

you see that headline question mark what is it tell you? it ishat it tells me, and so important to note, that it is an international call by the hong kong and shanghai bank. this is a huge call. what it tells me is you wonder how many other firms are going to catch up with the recession call, of this writing markdown of hsbc. how many people are behind these calls? jonathan: and could the bond market be paying trade all over again. i am looking forward to this discussion, coming up after the break. "surveillance" is next. i am on twitter. we are back after this short break. ♪

now syria. afghanistan,fter

america considers a third front. ourral james stravidis on ouron, our economy and fractured international relations. it's not gat. contain chinese efforts. christine lagarde. francine lacqua considers the new mediocre. good morning, everyone. this is "surveillance" it is thursday, october 8. i'm tom keene. from london, jon ferro. you have an important bank of england meeting in one hour. what we look for? jonathan: i want to know whether the issues are brought have altered the central view of the mpc. look to the vote, look to the minutes. tom: